VietinBank to enhance operational risk management

Nguyen Thu Hang, operational risk director of VietinBank, gave a presentation

Pioneer in operational risk management

This is the second conference on operational risk management held by VietinBank in two consecutive years. As the pioneer bank in operational risk management in Vietnam, VietinBank has been updating the best international practices in the industry.

This year, under the theme “Operational Risk Management - International Practices and Applications in Vietnamese Commercial Banks”, the conference addressed three prevalent topics: operational risk appetite and the three lines of defense; loss data collection and sources to record loss; and fraud management and customer profile. This conference attracted great interest from the authority, domestic and foreign experts and other commercial banks.

“With the presence of experienced and prominent speakers from VietinBank, HSBC, CMA Australia, Deloitte and other well-known industry players at this conference, VietinBank hopes that it will be a truly meaningful professional forum for participants to share experience and have in-depth discussions on issues related to operational risks, thereby making valuable recommendations for the future development of the banking sector,” said Bui Nhu Y, deputy CEO of VietinBank.

Bui Nhu Y, deputy CEO of VietinBank with experts

Capacity building and institutional development

The Vietnamese and international banking sector recently suffered from a series of financial frauds and scams, as well as ATM skimming and fake credit card incidents. In addition, the growing popularity of online financial services, which leads to declining use of cash and fading physical barrier, is also another trend that can increase operational risk if the authority and commercial banks do not take preventive or remedial actions.

Kevin Green, chief risk officer of HSBC Vietnam said that the current types of operational risks in Vietnam included external fraud such as fraudulent cash withdrawals or payments, trade finance facilities, internal fraud, information security risk and legal risk. These are all major challenges to banks.

In order to manage risks, according to Green, an effective solution would be strict implementation of an operational risk management cycle, including four steps: identification and assessment, monitoring, mitigation/management, and reporting.

One of the most important yet complicated aspects of risk management is reporting losses and identifying sources to record losses. This is also a matter of special interest for VietinBank in the recent period.

At the conference, Nguyen Thu Hang, operational risk director of VietinBank, gave a presentation on “Operational risk provision - International practice and recommendations for application at Vietnam commercial banks.”

Hang recommended that credit institutions should be allowed to proactively use appropriate resources instead of financial reserves only, as prescribed by current practice, to cover operational losses since it is quite lengthy and difficult to tap the financial reserves. Hang also suggested the Ministry of Finance and the State Bank of Vietnam to allow credit institutions to set provisions for exogenous, uncontrollable and unmanageable operational risks whose sizes and frequencies can be reliably estimated.

Le Thanh Ha, vice director of VietinBank’s Card Center also stated that in order to ensure the sustainable development of the card market, it should be both critical and urgent to have regulations and guidance on establishing and using non-credit provisions in general and card-related non-credit provisions in particular.

During the session “Fraud management and Customer profile”, experts from Deloitte and Krungsri Bank from Thailand presented the new trends in fraud management. They also elaborated on key solutions to help banks improve their ability to respond to financial crimes.

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